Curtains for the Observer Roles on the Facebook Board?

[UPDATE]

According to several sources, Facebook has discussed eliminating the observer status slots from its board.

Those positions are currently held by Greylock Partners David Sze (pictured here) and also Paul Madera of Meritech Capital Partners, both of whom are early Facebook investors, and they currently remain on the board as they always have been.

In any case, it’s not clear if Facebook can remove that status from preferred investors.

But the company might be discussing it because–as Facebook grows–it needs a more formal board process, especially as it prepares for a public offering sometime in the future.

In that case, the observer slot might be eliminated as the company moves to add more full-time members to the board. Observers do not attend all parts of the board meetings.

While Madera (pictured here) and Sze, well-regarded and well-liked Silicon Valley investors, could be in line for those slots, Facebook is unlikely to want too many venture capitalists on the board permanently.

The board already includes Accel Partners’ Jim Breyer, whose firm has a large investment in the company; Founders Fund’s Peter Thiel, the original investor in the privately held social-networking site; and, more recently, longtime Silicon Valley entrepreneur Marc Andreessen.

Greylock and Meritech were one of the earlier investors in Facebook, although its stake is smaller than that of Accel and Founders Fund.

A Facebook spokesperson had no information about such a development; I have a call and an email into Sze for comment, which he has not yet returned.

http://500hats.typepad.com/ dave mcclure

“…Greylock Partners David Sze … and Paul Madera of Meritech Capital Partners, both of whom are early Facebook investors.”

ok, maybe i’m nit-picking here, but $27.5M Series B investment on a rumored ~$500-550M pre-money valuation isn’t exactly what i think of as an “early” investor. in fact, you’d be stretching to even call Accel’s $10M Series A on $100M pre “early”. Peter Thiel writing a $500K check was early, the rest of those folks were followers.

i know it’s accepted protocol for VCs who do anything shy of $100M mezzanine deals to call themselves “early-stage investors”, but that’s hogwash.

let’s be serious: early investing is when crazy-ass angels like me take a flyer on a company and write them a check before they’ve even got a product out the door, or when a VC puts down $1-2M on someone they think is smart, before they’ve demonstrated significant growth or revenue. typically the angel deals are done at pre-money <$1-3M, or VC deals at pre-money <$5-7M.

by definition, if the company has a pre-money valuation north of $10-25M, or is raising a Series B round, it sure as hell ain’t early.

btw, the more interesting back-story on the Greylock-Facebook round is that David Sze “passed” on the earlier Series A deal when Accel put $10M in on a $100M pre, but then he had the courage / balls a year later to swallow his pride, change his mind, and jump in on the B round higher valuation. whether or not Facebook is worth $5B or $15B, that decision was probably a savvy one.

for his quote about passing on the earlier deal, see:
http://www.nytimes.com/2006/05.....1185595200
http://kara.allthingsd.com Kara Swisher

D:

Thanks for the history lesson!

Curtains for the Observer Roles on the Facebook Board?

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